PPD opened for business in 1985 with one employee – company founder Fred Eshelman, a pharmacist with a big vision. When the Carlyle Group bought the firm in a $3.9 billion deal in 2011, PPD was operating in 33 countries and employed 10,000 workers.
 
The company’s success not only solidified Wilmington’s reputation as a hub for contract research firms, but its shiny, modern 12-story headquarters was a vital part of the transformation of the northern riverfront area.
 
Now with 26,000 employees (including 1,800 locally), the homegrown company is about to become part of something even bigger, after the announcement in April that it would be purchased by Thermo Fisher Scientific (TFS). Massachusetts-based TFS has 80,000 employees and supplies a host of products, equipment and services to health care and life-sciences organizations.
 
While TFS sells lab equipment and is involved in drug manufacturing, PPD strictly provides services. Industry observers said the deal provides a missing part of the puzzle for TFS’s product development.
 

The Companies

 
On a contract basis, the Wilmington-based firm provides research and other services to pharmaceutical and biotechnology companies. PPD recruits patients and clinical trial investigators, manages clinical trial sites and provides services supporting a drug as it approaches regulatory approval and after it reaches the market.
 
It also offers laboratory services, which make up about a fifth of its revenue. PPD’s $4.7 billion in revenue last year made it one of the largest companies in the contract research sector, a $50 billion industry.
 
In 2017, PPD closed on a recapitalization deal and added two new investors in addition to The Carlyle Group and Hellman & Friedman. The investment with a subsidiary of the Abu Dhabi Investment Authority and an affiliate of GIC, Singapore’s sovereign wealth fund valued PPD at the time at more than $9 billion.
 
PPD made an initial public offering in February 2020 and began trading on the Nasdaq. Its market capitalization on June 3 was $16.25 billion. David Simmons has been PPD’s chairman and chief executive officer since 2012.
 
Based in Waltham, Massachusetts, TFS provides a broad range of products and services through a large number of brands, such as Applied Biosystems, Invitrogen, Fisher Scientific and Patheon. Whereas PPD provides only services, TFS sells actual products, such as complex instruments and chemicals used in research. In 2020, about 20% of the company’s $32 billion in revenue came from services. The company, however, has recently become more involved in providing services to its customers. TFS trades on the N.Y. Stock Exchange and on June 3 had a market capitalization of $176.55 billion. Marc Casper is president and CEO.
 

The Big Deal

It was announced April 15 that the board of directors of both companies had approved a definitive agreement under which TFS will acquire PPD for $47.50 per share, a total cash price of $17.4 billion. TFS will assume $3.5 billion of net debt with the purchase.
 
According to a news release from the companies issued the day the deal was announced, the price “represents a premium of approximately 24% to the unaffected closing price of PPD’s common stock on the Nasdaq as of Tuesday, April 13, 2021, or 32% to the 60-day VWAP inclusive of that date.”
 
“Pharma and Biotech is our largest and fastest growing end market, and our customers value us as a strategic partner and an industry leader,” Casper said. “The acquisition of PPD is a natural extension for Thermo Fisher.”
 
The news release said that Thermo Fisher’s access to key decision-makers in the industry will increase opportunities for PPD to win additional work.
 
“No further action by other PPD shareholders is required to approve the transaction,” the statement said.
 
Thermo Fisher will use debt financing and cash on hand to complete the transaction.
 
Barclays Capital and Morgan Stanley & Co. are serving as financial advisers to Thermo Fisher on the deal. Cravath, Swaine & Moore and Arnold & Porter Kaye Scholer are serving as legal counsel.
 
For PPD, J.P. Morgan Securities is the financial adviser and Simpson, Thacher & Bartlett are providing legal counsel.
 
Casper said that, unlike some acquisitions, the purchase of PPD was not about merging two companies to gain efficiencies by reducing the number of employees. Rather, he said, the goal is to accelerate growth.
 
“One of the things that's different about this type of transaction, for the colleagues that are delivering the workday in and day out of PPD, their job’s going to be exactly as it is today, post-close. There’s not an integration with job changes,” Casper said after the deal was announced.
 
Testing and development for new and experimental drugs have boomed since the COVID pandemic began, and industry observers see a bright future for companies involved in developing both treatment and preventive products for possible future disease outbreaks.
 
Thermo Fisher Scientific spokesman Ron O’Brien said that as of June 3 nothing had changed in the deal’s status. “The closing is expected to be completed by the end of 2021 (and is) subject to the satisfaction of customary closing conditions, including the receipt of applicable regulatory approvals.”

What Will Happen Locally?

 
When the deal closes PPD will become part of TFS’s Laboratory Products and Services Segment.
 
TFS officials said they plan to bring on members of PPD’s leadership team but have not responded so far to questions about the status of Wilmington-based employees or its continued presence in the Port City.
 
The news release announcing the sale said that shareholders holding 60% of PPD common stock already have approved the transaction.